Arista Networks, Inc.

What they do

Arista designs and sells high-speed Ethernet switching and routing platforms, along with its Extensible Operating System (EOS) and Network Data Lake (NetDL) software, to interconnect AI Centers, Data Centers, Campus Centers, and WAN Centers. Revenue comes from product sales (switching and routing platforms) and associated software and services. The company serves Cloud and AI Titans, AI and Specialty Providers, and Enterprise customers.

Revenue drivers

• Core (AI, Cloud, Data Center Networking) — Largest product category, approximately 65% of revenue; includes high-speed Ethernet switches for AI and cloud data centers.
• Cognitive Adjacencies (Campus and Routing) — Approximately 18% of revenue; includes campus switching and routing products.
• Software and Services — Approximately 17% of revenue; includes EOS software subscriptions, NetDL, and related services.
• Customer segment: Cloud and AI Titans — Approximately 48% of revenue; large hyperscalers and AI providers, with two end customers each contributing more than 10% of total revenue.

Recent performance

In Q2 2026, revenue was $3.036 billion, up 37.7% year-over-year and 12.1% sequentially, the company's first $3 billion quarter. GAAP diluted EPS was $0.95 and non-GAAP diluted EPS was $1.02, up 39.7% year-over-year. Non-GAAP operating margin was 49.9%, up from 48.8% a year ago. For fiscal 2025, revenue mix was 65% Core, 18% Cognitive Adjacencies, and 17% Software and Services.

Strategy

Arista's strategy is its 'Centers of Data' approach, unifying four domains (AI, Data Center, Campus, WAN) on a single EOS-based platform. Management plans to increase R&D investment to develop new features and expand into adjacent markets, and to grow its global sales force and channel partnerships. The company is innovating for AI fabrics with high-bandwidth, standards-based, open networking to avoid vendor lock-in and reduce operational complexity. It is also targeting enterprise campus expansion, as recognized by the 2026 Gartner Magic Quadrant for Enterprise Wired and Wireless LAN.

Risks

• Customer concentration — Two end customers accounted for 16%, 15%, and 21% and 26%, 20%, and 18% of total revenue in 2025, 2024, and 2023 respectively, creating unpredictability in order timing and revenue.
• Supply chain constraints — Key components come from sole or limited sources, increasing risk of shortages, extended lead times, or supply changes, particularly in memory and silicon markets.
• Gross margin pressure — Large-scale orders often require pricing discounts that reduce gross margins in the periods when sales occur, and gross margins are expected to fluctuate.
• Tariffs and trade policies — Escalating U.S. tariffs and retaliatory measures could negatively affect global economic conditions, financial markets, and Arista's business.

Outlook

For Q3 2026, management expects revenue of approximately $3.3 billion, non-GAAP operating margin of 48-49%, and non-GAAP diluted EPS of $1.06-$1.08. The company expects revenue and gross margins to vary over time, with continued investment in R&D and sales expansion. Management believes existing cash and cash flow from operations will be sufficient for working capital and growth strategies for the foreseeable future.